2018-06-11

160 Buying Restrictions Added in 2018 and Home Prices Keep Rising

Buying restrictions are up 60 percent from the first five months of 2017, hitting 160 by the end of May. Last year saw 250 restrictions added nationwide. And home prices keep on rising.

Chinese officials from the central government met with the leaders of 12 cities in May because their home prices were still rapidly rising. It may be that prices will turn the corner in the next couple of months following their crackdown.

Ren Zhiqiang argues there are other factors in play, such as housing being one of the most secure forms of property rights in China. "The reason why the people of the country are robbing the house is because in an imperfect property rights system, housing rights are the longest."

He also blames the talent war and lotteries for rising prices. As noted here in recent weeks, the lotteries are driving demand up, not down, because it is creating excess demand from speculators. It's also increasing demand because people see 4 times and 10 times oversubscribed lotteries and assume that is all serious housing demand. If you were a marketing agent trying to whip up a frenzy, creating a sense of artificially low supply/high demand, a housing lottery is one way to do it.

On May 9, the Xinhua News Agency issued a document saying that the Ministry of Housing and Urban Development had interviewed 12 cities including Chengdu and Taiyuan before and after May 1st, mainly in the northeast, central and western regions, and Hainan with favorable policies.

The reasons for the interviews are nothing more than that the property market in these cities is not yet stable. The country is a thorough explanation of the through train "see also interview, release of new signals in the regulation of the property market".

In response to the national call, the interviewed cities have issued measures to deal with the overheating of the property market.

As a result, Chengdu has upgraded its purchase targets from natural persons to households, Xi'an has conducted interviews with 42 housing enterprises including Country Garden, and Kunming, Guiyang, and Changchun have upgraded their sales restrictions.

The climax of the property market regulation in May appeared on the 19th. The Ministry of Housing and Urban-Rural Development once again reiterated its unwavering focus on real estate regulation and control and its efforts to ensure that it will not be relaxed. It will also make plans for housing development, housing and land supply, capital management, market supervision, and implementation of main responsibilities. Clear requirements.

As a result of city policy, various localities have conducted differentiated control according to their own circumstances.

Take the dual-track system implemented in the 1980s as an example. The first reform was partly based on the planned economy, which resulted in insufficient supply of housing by market economy and rising prices. Later, after price reforms, the real estate prices stabilized steadily after market pricing.

“Regardless of whether the market is priced or not, it is people’s subjective actions in the game.” Ren Zhiqiang believes that there is a game relationship between people and the market in the real estate market. There are optimal, sub-optimal, and worst arguments in economics. In the reform process, the best is that most people benefit.

House prices cannot be completely predicted. Ren Zhiqiang believes that inventory can be seen in local games, and possible trends are also predictable. However, the time and span of the trend depend on the government.

Regarding the current "rushing people" in the raging cities, Ren Zhiqiang believes that the introduction of talent policies throughout the country has led to a surge in housing demand. The supply side still needs to be controlled, and the supply does not increase. On the demand side, there is a large amount of special needs after the influx of talents. "Yaohao" is because the demand is too large and the supply is insufficient. The price will certainly rise.

"The real property rights are private property rights." Ren Zhiqiang said that China does not have a good property rights system and there will be no good entrepreneurs. As an entrepreneur who has grown up during the reform and opening up process, he believes his role is to open fire.

“When it comes to criticizing the government, it must be serious and it cannot be a happy smile.” Ren Zhiqiang said that he hopes the country will be better and China will become more market-oriented.

China doesn't want home prices to fall. It doesn't want home prices to rise. It wants to limit supply and speculative/investment demand. It doesn't want to restrict credit growth too much. It wants people to invest in the economy, but it makes it difficult for private companies to obtain credit as local governments and SOEs get first feeding at the credit trough. Homes are one of the best and most secure investments in China (if not the best for small investors). Rising incomes and urban development create a constant buying pressure as younger workers upgrade over existing housing, even before considering factors such as credit growth. Price controls and intervention doesn't change fundamentals, but only distorts the supply or demand picture by artificially suppressing them. Finally, by taking on the role of central planner, the government takes on a responsibility for forces that are out of its control to a great degree. The end result is an economy still over reliant on real estate and a perpetual affordability issue that gets blamed on the government.